Property Sale Agreement: Key Aspects 1

Property Sale Agreement: Key Aspects

Last Updated on 3 weeks by ChennaiRealties

What is a Sale Agreement?

A sale agreement in property matters is a legally binding document that outlines the terms and conditions of a property sale. It is signed by both the buyer and seller and typically includes information about the property details, the purchase price, the payment terms, and the closing date.

Sale Agreement vs. Sale Deed

It is imperative to differentiate between a sale agreement and a sale deed. A sale deed is the pivotal document that formally transfers ownership of the property from the seller to the buyer. Conversely, a sale agreement operates as a promise for the future, delineating that the designated property will be transferred to the buyer or rightful owner on a subsequent date. The Transfer of Property Act, 1882, particularly Section 54, governs contracts of sale or sale agreements.

Significance of a Sale Agreement

While the necessity for a sale agreement preceding a sale deed is not obligatory, its utility becomes pronounced in various circumstances.

When a buyer intends to secure a loan from a bank or financial institution to facilitate the property purchase, the sale agreement becomes indispensable. This enables the financing entity to assess the requisite funds for the property acquisition.

Even in cases where the buyer possesses the necessary funds, documenting the understanding regarding the price and the seller’s commitment in a formal agreement becomes indispensable.

Likewise, when a prospective purchaser identifies a property of interest after an extensive search but is momentarily constrained by limited funds, a sale agreement proves advantageous.

The absence of a sale agreement opens the door for potential setbacks. The seller might renege on the agreement if presented with a more lucrative offer, nullifying the buyer’s exhaustive efforts and the financial resources expended on legal assessments.

A sale agreement also grants the seller the assurance of finalizing the sale within the stipulated time frame, aiding in strategic planning.

Precautions Before Entering a Sale Agreement

Before signing the sale agreement, the legality of the documents should be checked. Apart from the legal opinion, field investigation should also be conducted. Some issues may not reflect in the legal opinion. Legal opinion in most cases is based on the documents that are produced before the lawyer.

The seller must make the set of documents pertaining to the property available to the buyer to facilitate their review of the legal process.

In cases when the owner sells the property through a Power of Attorney, the Life Certificate of the owner must be obtained at the initial stage itself. The Life Certificate is mandatory in Tamil Nadu.

Engaging with Traders in Property Sale Agreements

In the lead-up to signing a sale agreement, buyers often encounter a distinct challenge – properties brokered by traders. These intermediaries, distinct from power of attorney holders, establish sale agreements with property owners and subsequently seek buyers, typically with a margin. This scenario arises when property owners exhaust avenues to sell their properties, leading to engagement with these traders.

When dealing with traders, negotiations regarding property rates don’t occur with the owner but with the trader. This brings an element of risk, requiring buyers to commit funds to the trader and formalize agreements. In such cases, track record of the trader should be ascertained before committing funds. Pricing Dynamics:

Though traders factor in their margins, the quoted price may align with prevailing market rates or sometimes even lower. Traders’ margins stem from their ability to acquire properties at advantageous rates.

 Prudent decision-making, scrutiny of traders’ reliability, and an understanding of market dynamics are essential when navigating such transactions.Key Components of a Sale Agreement

Key Components of a Comprehensive Sale Agreement

A meticulously drafted sale agreement should encompass critical facets:

1. Buyer and Seller Information: Full names and contact details of both parties, ensuring legal enforceability and easy identification

2. Property Details: Precise property address and detailed description to eliminate ambiguity.

3. Purchase Price and Payment Terms: Clearly stated property price and well-defined payment schedule to avert future disputes.

4. Closing Date and Possession:Explicitly mention the closing date and possession details to ensure clarity.

5. Contingencies and Conditions: Incorporating any conditions that must be met before finalization, such as mortgage approval or repairs.

6. Signatures and Witnesses: Legally binding with signatures of both parties and witnessing by two non-involved individuals.

Importance of Sale Agreement Registration

In Tamil Nadu, the registration of sale agreements was made compulsory by an amendment in 2012. However, even if the sale agreement is not registered, the unregistered sale agreement can also be filed as evidence while filing any suit for specific performance, according to a Supreme Court ruling in 2022.

It is highly recommended to protect the interests of both the buyer and seller.

When a sale agreement is registered, it will show up in the Encumbrance Certificate, making it karder for the seller to sell the property to another person.

The charges for registering a sale agreement in Tamil Nadu are as follows:

Stamp duty: ₹20/-

Registration charges: 1% of the advance paid for entering into the agreement

Drafting the Sale Agreement

While a standardized proforma exists for reference in the Tamil Nadu Government’s website REGINET, engaging a legal professional experienced in property matters is advised for drafting. This expert guidance ensures the inclusion of vital terms, adherence to legal requirements, and reduces the likelihood of future disputes.

A significant legal recourse arising from a sale agreement is the doctrine of specific performance, bolstered by the Specific Relief Act and the Indian Contract Act.

Fulfillment of agreement conditions empowers the buyer to seek a court order compelling the seller to execute the sale deed, effectuating the property transfer in line with the agreement.

The Specific Relief Act sets a time limit of 3 years from the date of breach for seeking legal remedy under the doctrine of specific performance. The buyer can also seek a refund of the advance amount paid within 12 years of the date of breach.


A well-drafted and registered sale agreement is essential for a transparent and legally secure property transaction. While registration adds an extra layer of protection, buyers should conduct due diligence and verify property titles before proceeding with any transfer. Legal remedies, such as specific performance, provide buyers with the means to enforce the seller’s compliance with the terms of the agreement.  Given the myriad court judgments addressing sale agreement disputes, professional guidance becomes paramount before embarking on this pivotal step.

பொறுப்பு துறப்பு:இந்தக் கட்டுரையில் உள்ள விவரங்கள், கல்வி மற்றும் தகவல் நோக்கங்களுக்காக மட்டுமே. இது சட்ட ஆலோசனை அல்லது நிதி ஆலோசனைக்காக தரப்படவில்லை. இதில் உள்ள தகவல்களை அடிப்படையாகக் கொண்டு எந்த முடிவுகளையும் எடுப்பதற்கு முன்பு, வாசகர்கள் தங்கள் சொந்த சுதந்திரமான ஆராய்ச்சியை மேற்கொள்ளவும், நிபுணர்களுடன் கலந்தாலோசிக்கவும் அறிவுறுத்தப்படுகிறார்கள்.-Ed

Disclaimer: The information contained in this article is for educational and informational purposes only. It is not intended to be legal or financial advice. Readers are advised to do their own independent research and consult with professionals before making any decisions based on the information in this article-Edit


One response to “Property Sale Agreement: Key Aspects”

  1. Kalarickal Fabian avatar
    Kalarickal Fabian

    Good.Question: How much advance should the seller ask? 20 % or more?

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